Asian Stocks Slump as China Rate Cut Disappoints

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Hong Kong's Hang Seng Index dropped 2.8 percent to 14,220.79 while Shanghai's main index plummeted 4.6 percent to 1,897.22 as both markets came under pressure after Beijing lowered a key interest rate late Monday.

There was little cheer before the year-end holidays. Resource firms tumbled along with oil prices and carmakers dropped sharply on news Toyota expects to post its first annual operating loss in 70 years.

In China, Hong Kong's Hang Seng Index dropped 2.8 percent to 14,220.79 while Shanghai's main index plummeted 4.6 percent to 1,897.22 as both markets came under pressure after Beijing lowered a key interest rate late Monday.

Investors were unimpressed by 0.27 percentage point cut on the benchmark one-year lending rate to 2.25 percent, its lowest level since February 2004. Many had expected a half-point cut, analysts said. It was the fifth cut in four months as Beijing rushes to revive economic growth.

After rallying off last month's lows, Asian markets were succumbing to selling as many investors moved to close out their positions before the end of one of the most tumultuous years in decades.

"There's a lot of profit-taking before the holiday," said Ben Kwong Man Bun, the chief operating officer at KGI Securities in Hong Kong. "People believe the upside will be very limited for now. The global economy is facing a huge problem."

In Europe, stocks traded mostly higher early in the session. Britain's FTSE 100 and France's CAC 40 gained about 0.7 percent each, while Germany's DAX was up by about 0.1 percent.

Asia's lurch downward came after Wall Street fell overnight.

Investors spooked by the dismal news from Toyota and U.S. drugstore operator Walgreen Co. sent the Dow lower by 59.34 points, or 0.69 percent, to 8,519.77 — its fourth straight daily loss. The broader Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63.

U.S. stock index futures gained slightly. Dow futures were up 23 points to 8,562, while S&P futures were up 4.7 points, or 0.5 percent, to 876.

In other markets, Taiwan's main index slumped 2.9 percent after the government reported that the November unemployment rate rose to a five-year high. Russia's main dollar-denominated index was little changed.

Crude oil dipped in Asian trade, with light, sweet crude for February delivery edging down 9 cents to $39.82 a barrel on the New York Mercantile Exchange. Oil prices have fallen 73 percent since July amid fears that massive job layoffs and plummeting consumer spending in the U.S. are weakening global demand.

In currencies, the dollar was slightly lower at 90.10 yen from 90.13 yen late Monday in New York. The euro edged up to $1.3972 from $1.3951 on Monday.